Enforcing the unconventional – Jump Trading International Ltd v Couture and another

Facts

Mr Couture had been employed by Jump as a quantitative algorithmic trader. Following his resignation, he was placed garden leave for the duration of his 12 month notice period.

Mr Couture’s contract of employment contained a non-compete clause. Unusually this had a variable duration from zero to 12 months post garden leave with Jump required to specify the duration within 20 days of notice being given. Mr Couture was also required to notify any prospective employer of the post termination restrictions and Jump of the identity of the third party offering him work.

At the time of his resignation Mr Couture had accepted an offer to work for Verition Advisers UK Partners LLP who were a competitor. However, he did not tell Jump this and instead told them he would be setting up his own business. Jump advised Mr Couture that it would be enforcing a 12-month non-compete period which would run from the end of his garden leave. This was not acceptable to Mr Couture and he advised Jump of this.

Almost two months after his resignation, Mr Couture advised Jump that he would be joining Verition. There then ensued some without prejudice correspondence between the parties to try and resolve the non-compete issue but this was not successful and Mr Couture ultimately advised Jump that he did not believe the restrictions were enforceable and he would be joining Verition when his garden leave ended.

After a gap of four months, Jump replied restating its position that Mr Couture would be breaching his restrictions if he joined Verition and wrote to Verition in similar terms.

Jump subsequently (after Mr Couture had joined Verition) applied for an interim injunction to enforce the 12-month non-compete clause against Mr Couture and Verition and to effectively pause Mr Couture’s employment with Verition pending determination of the validity of the covenant.

Decision

The High Court refused the interim injunction application holding that Jump’s delay was unreasonable given the history. It did instead order a speedy trial.

The Judge did not expressly comment on the validity of the covenant but did observe:

• that whilst the uncertainty of the duration of the covenant at the time it was entered into may be relevant, there was still a serious issue to be tried and it was not necessarily unreasonable as the employee knew the maximum duration; and
• the issue of the length of the restriction (two years taking into account the garden leave period) was fact specific and to be determined at final trial.

Appeal

Both parties appealed the decision. Jump sought to overturn the decision to refuse the interim non-compete injunction and Mr Couture and Verition sought to overturn the order for a speedy trial. The Court of Appeal refused permission in both cases.

Comment

Whilst we do not yet know whether the ‘unusual’ restrictive covenant will be enforceable, there are nonetheless some important takeaways from the judgments.

The purpose of an interim injunction is to restrain the alleged breach of a restrictive covenant pending a final trial. They can therefore be a useful tool in reducing the risk to the business as the employee is unable to compete during that time.  The Court has discretion whether to grant an interim relief and in doing so will consider the relative strength of the parties’ cases, the likely harm to each party of granting (or not granting) the injunction and also whether the claimant has acted promptly in making the application.

What this case demonstrates is that employers need to act without delay. Jump had known for some time that Mr Couture intended to join a competitor and the matter could have been dealt with before he started his new employment had they not delayed in making their application. This was a major factor in the court’s decision.

Employers should also take this opportunity to review existing contracts of employment to ensure that any post termination restrictions are clear and appropriate for the particular employer.

The Government has recently announced it intention to cap the length of non-compete clauses to 3 months and you can find out more about these proposals and the potential implications here.

Get in touch with an Employment law advisor today

The enforcement of restrictive covenants is a technical area of law, and whether you are trying to enforce a covenant against a departing employee or you are on the receiving end of enforcement action, it is important to take advice. Please contact Claire Hollins on 0161 912 6148.